How to Measure ROI in Digital Marketing

John Ahya By John Ahya
Last Updated: May 03, 2024

How to Measure ROI in Digital Marketing

When it comes to developing effective digital marketing strategies, the biggest question is not something like “How much should I spend? “

Instead, it’s like “For every dollar I spend, how much return will I get?”

In other words, it’s all about return on investment, more often known as ROI.

Every business wants an optimum ROI on their digital marketing campaigns. Consequently, they seriously tried boosting sales and website traffic through various online activities.

Digital marketing strategies allow entrepreneurs to promote their products without any geolocation barrier for additional fees. Yes, you can opt for paid ads to target specific demographics worldwide.

But how much of what you spend on digital marketing will you get back as revenue? Here the concept of ROI comes into the picture – a metric that is used across all industries. When you develop a digital marketing strategy, you and your team need to be aware of these kinds of important KPIs to compute the return on each penny spent.

But the sad part is more than 34% of digital marketers don’t know how to measure their digital marketing ROI, according to Statista. If you are one of them and skeptical about the entire concept, continue reading to learn more about how you can measure the ROI for digital marketing campaigns.

What is ROI in Digital Marketing?

Digital Marketing ROI means the amount of money you spend on campaigns compared with the amount you generate through those campaigns. Digital marketing ROI can give you a clear picture of whether you are allocating your resources and money effectively. A positive ROI means your campaigns are generating more revenue than you spend on them and a negative ROI means vice versa.

Now, you may have a question what is a good ROI for digital marketing?

So, an efficient marketing campaign may result in a cost ratio of 5:1, this ratio indicates you make $5 for every $1 you spend on marketing. The following is the ROI calculation formula:

ROI = (net profit/total amount spent or costing) X 100

Beyond just understanding the formula and meaning of ROI, it’s crucial to delve into the nuances of its application within the digital landscape. One vital aspect to consider is the attribution model used to assign credit to various touchpoints in the customer journey.

According to a study by DemandLab, 64% of marketers struggle with understanding and effectively utilizing attribution models to measure ROI accurately. This highlights the complexity of tracking conversions across multiple channels and platforms, making it essential for marketers to adopt sophisticated attribution models to gain a comprehensive understanding of their digital marketing ROI.

Moreover, the dynamic nature of digital marketing demands continuous optimization of strategies to maximize ROI. A survey conducted by HubSpot revealed that 61% of marketers consider improving SEO and growing their organic presence as their top inbound marketing priorities.

This underscores the importance of staying abreast of evolving trends and technologies in the digital sphere to drive ROI growth effectively. By staying agile and adaptive, businesses can not only measure ROI accurately but also enhance their digital marketing efforts for long-term success.

Why Measure ROI in Digital Marketing?

A lot of digital marketers approach online marketing campaigns the wrong way. They are like creating social media accounts, posting product images, creating GMB profiles, and expecting some profit in return. Unfortunately, effective digital marketing strategies or campaigns aren’t that simple.

It takes a lot of effort to carry on digital marketing activities that strengthen your brand and benefit your business in the long run. Hence, tracking ROI is so important and offers several benefits to businesses including,

Explains Why Resources Are Being Used

Campaigns on digital marketing need a significant investment of time, money, and effort. Businesses can justify expenditure and assess if resources are being used effectively by measuring return on investment.

Determines What Needs To Be Improved

Businesses may identify which projects are successful and which are not by measuring return on investment. With the use of this data, they may focus on efforts that yield the highest return on investment and either improve or stop underperforming campaigns.

Improves The Ability To Make Decisions

Businesses can use the data from ROI measurement to make data-driven future digital marketing decisions. If businesses know which projects yield the best return on investment, they can deploy resources more wisely down the road.

Get Support from Stakeholders

Illustrating the advantages of their resources is essential when stakeholders participate in company ventures. It also strengthens the support and legitimacy of upcoming initiatives.

Anticipate Constant Growth

Businesses can continuously improve their digital marketing initiatives using an ongoing process called ROI measurement. By making data-driven decisions, getting investment assistance, and understanding more about online customer behavior, businesses may grow and develop over time.

You can evaluate the success of initiatives and campaigns and find possible areas for expansion by monitoring and comparing your ROI over time. For digital marketing, tracking sales, expenses, and costs for every product or campaign is crucial to determining return on investment.

7 Steps to Measure ROI in Digital Marketing

You are a marketing blind without the ability to demonstrate the return on investment (ROI) of your digital marketing initiatives, adverts, and platforms. Moreover, a recent study from Harvard Business School revealed that just 23% of marketers said they were accurate about tracking the right KPIs for their marketing activities.

Now, what about the rest 77% For that, marketers need to adopt results-driven, efficient tactics to maximize return on investment in digital marketing. Here are some steps to follow to boost your ROI; let’s throw some light on each of them:

1. Set a Realistic ROI Goal

The objectives of your business may determine what constitutes a quality ROI number.

A 5:1 ratio is often seen by digital marketers as a positive return on investment, however, this figure might change depending on the campaign and industry. Numerous factors, including your market, platforms, and content, may have an impact on this figure.

To determine your optimal ROI, you can consider industry benchmarks as well as your past performance. The ROI objective could vary depending on the marketing campaign you run.

You might plan certain initiatives to generate a lot of conversions and run other campaigns to increase brand or product awareness. You can calculate your ROI more effectively if you are aware of each campaign’s unique objectives.

Get started with the SMART(Specific, Measurable, Actionable, Relevant, and Timely) method to create realistic and actionable goals.

2. Tracking KPIs for Digital Campaigns

Efficiently monitoring your Key Performance Indicators (KPIs) is crucial to optimizing your return on investment (ROI) in any digital marketing endeavor.

KPIs act as benchmarks, enabling companies to assess the success of their digital marketing initiatives. They give decision-makers at digital marketing agencies a performance overview so they may make the required changes.

Robust and actionable insights are provided by appropriate KPIs, enabling organizations to maximize the return on investment from their digital marketing campaigns.

3. Evaluate Conversion Rates

The following techniques can be implemented to monitor conversion rates:

  • Traffic channel: Keep an eye on the sources that have the best conversion rates, including email lists or social media accounts. This aids in budget allocation decisions.
  • Device: Keep track of the devices—such as PCs or mobile phones—that recipients use to access your content or products. Find out which device they most frequently convert on.
  • Timing: Keep note of the times of year that yield the best outcomes. For instance, if a campaign is focused on summer activities, you should anticipate a drop in conversions in the winter and monsoon.

4. Analyze Data

Analyzing your data is essential to determining the success of your digital marketing campaigns. Consider looking at more telling statistics, like engagement, conversion, and customer acquisition costs, rather than surface-level metrics like clicks and impressions.

For instance, when a software development company looks into its analytics, it finds that although site traffic has increased due to its recent content marketing efforts, the bounce rate for this traffic is significant. They understand that although the content attracts readers, they must engage them successfully.

Armed with this valuable data, they may improve their content strategy to better cater to the requirements and interests of their audience.

5. Use the Right Metrics

You must understand your digital marketing KPIs, or key performance indicators, to gauge your level of success. Additionally, it differs from company to company; you must understand what success looks like for your brand. If you’re starting and want to get some exposure, you might be targeting click-throughs to your website or trying to increase your conversion rates.

Many digital marketing metrics exist, such as customer lifetime value and cost per acquisition or lead, but only some are suitable for some organizations. As such, selecting the ideal metrics for each of your unique digital marketing initiatives is critical.

We have identified two critical measures, cost per exposure and cost per engagement, that you should monitor. These are essential for understanding.

6. Know Where Your Money is Going

Getting the right customers and setting quantifiable goals together can be a great combination for promising outcomes when done correctly. Even if this approach might work well for upcoming promotions, it’s important to realize the initial cost of the digital marketing effort before applauding the outcome. It’s standard practice to avoid certain hidden costs in marketing initiatives, which falsify the genuine return on investment.

A Percolate study found that when marketing budgets rise, advertising expenses—and non-working expenses in particular—start to rise as well, using up a disproportionate amount of resources as the company expands.

For instance, a business with a $10 million marketing budget may spend 18% of its budget on production expenditures for advertisements, whereas a business with a $1 billion marketing budget will spend 27% of its budget on the same.

This is a crucial factor for businesses that are expanding quickly to take into account, especially since there is no sign that the problem will disappear.

7. Test and Optimise

A solid digital marketing plan is enhanced by ongoing testing and optimization. A/B testing various campaign elements, like landing page designs and email subject lines, can provide insightful information about what appeals to your audience the most.

Based on these insights, make necessary changes to your strategy, targeting, and messaging. The objective is to increase efficacy and efficiency while raising ROI gradually.

For instance, an online shoe-selling store runs A/B testing on its landing pages and discovers that landing pages containing client reviews convert 25% more effectively than those without. After that, they improve every landing page using testimonials, which raises conversion rates overall and makes better use of the advertising budget.

Final Words

Regular ROI measurement is necessary to make proactive decisions and enhance performance over time. These seven steps can put you on track to measure what matters and whatnot while establishing smart goals.

If you are one of those entrepreneurs struggling to monitor digital marketing activities and campaigns and clueless about analyzing website traffic, monitoring social media engagement, or optimizing ad campaigns, we’ve got you covered.

Don’t settle for guesswork when it comes to measuring ROI. Trust 1White Label Agency and ensure that every dollar you invest in digital marketing delivers the maximum return. We offer white label digital marketing services including SEO, Facebook Ads, and PPC to help your digital marketing agency grow.

Let us help you take your business to new heights with measurable results you can count on.